Local attorney, others charged for alleged Ponzi scheme

A Bozeman attorney was charged last week in connection to the alleged operation of a Ponzi scheme and the defrauding of investors and farmers of more than $6 million via a Texas-based CBD isolate start-up.

Michael Rabb of the Rabb Law Firm and three others, including Byron Gruber — who previously practiced law in Gallatin County — were charged with six felonies regarding activity with Isotex Health, LLC. in 2019 and 2020.

“The Commissioner of Securities Insurance (CSI) and Gallatin County Attorney charged four men with engaging in a conspiracy to defraud investors, farmers, and the State of Montana through various means, including a Ponzi scheme,” a press release from the office of Troy Downing, the commissioner of securities and insurance, said.

The other two defendants are Jason Bradley Cross and Eugene Elfrank, both of whom court documents said were shareholders, managers and directors of Isotex.

Elfrank previously identified himself as the president of Isotex and Cross as the CEO.

All four are charged with conspiring or committing the offense of operating a pyramid promotional scheme, securities fraud, forgery, theft, false claims to a public agency and operating as a commodities dealer without a license.

"I want to thank Commissioner Downing for his diligent efforts investigating fraud within our county and across Montana,” said Gallatin County Attorney Audrey Cromwell.

In an email to the Chronicle, Rabb said he was “shocked” by the allegations and said Isotex had retained him five years ago “to provide honest legal work and advice,” and that he received a 1% "membership interest” of the company.

“At no time did I operate, control, or manage the company,” Rabb said. “Months after my representation began, the company provided me with a one percent “membership interest.” That “interest” did not convey any responsibilities regarding the management or operation of the company, and I never received any money, compensation, or benefits resulting from that one percent “interest.” I have only ever received payment for my invoiced legal services as its retained lawyer.”

In 2019, Isotex moved to Montana to begin its hemp production business and produce CBD isolate to sell as an ingredient to larger companies.

“We take industrially grown hemp that we’ve grown around the state of Montana and then we extract the CBD out of it,” Elfrank said in 2019 in Libby, after the company had purchased the Stinger Welding building for their operations and met with locals. At the time, Elfrank said they had interviewed 210 prospective employees with plans to hire 120.

After an investigation was conducted by a securities investigator and examiner, charges were filed in Gallatin County.

Court documents said the men "willfully violated” state statute “by knowingly and purposely inducing investors... to make payments in excess of $6 million which would then be used to pay prior investors,” such as James Mattingly, a professional poker player, “his principal investment of $300,000 plus 120% interest.”

“Defendant Byron Gruber admitted as much,” court documents said referring to a recorded phone call.

The defendants are also accused of threatening employees, investors, vendors and contractors with litigation “to quell dissent, propagate untruths, cause delay and improperly advance the goals of the co-conspirators,” — as well as forging, manipulating and altering documents like financial statements and crop insurance information and providing “false information to investors, potential investors, farmers, vendors, contractors, creditors and the State of Montana.”

The allegations are said to have occurred from April 2019 through July 2020 in seven Montana counties.

“I was completely shocked when I read the allegations against me. Some of the allegations occurred before I was retained by the company, and many others loosely, inaccurately, and falsely imply my involvement simply by virtue of being the company’s retained lawyer,” Rabb said. “These falsities have damaged my reputation and are indescribably humiliating. I hope that the falsities contained in the filed information were simply the product of honest mistakes.”

The Rabb Law Firm specializes in personal injury, real estate and business and employment and a representative said Gruber was employed by the firm from Oct. 2020 to July 2022.

In 2023, both Gruber and Rabb filed separate lawsuits on behalf of different plaintiffs against Dave’s Sushi, after two people died and numerous became ill presumably after consuming morel mushrooms, the Chronicle reported.

“I look forward to quickly clearing my name and want to reassure my family, friends, clients, and colleagues who know me—that you do know me,” Rabb said. “I humbly ask those who do not know me to reserve judgment until I am provided the opportunity to address these allegations in court.”

On Friday, Gruber would not provide comment to the Chronicle when he was reached at the number listed on his profile at Fraser Stryker, a law firm based in Omaha, Nebraska.

Then on Tuesday, a representative for Fraser Stryker told the Chronicle that Gruber had joined the law firm in 2023 but was no longer associated with the firm, which “had no knowledge of any of the activity with which Mr. Gruber has been charged.”

Cross and Elfrank could not be immediately reached for comment.

The four defendants are scheduled to appear in court at the Law and Justice Center in Bozeman on July 2, 2024, and prosecutors asked the cases to be joined and assigned to the same judge.